TWO more supermarkets started offering shoppers life insurance along with their groceries last month.
Tesco has been providing life policies from Norwich Union for some time, and now Asda has joined forces with Scottish Widows to sell their life cover products, whilst Sainsbury’s has teamed up with Legal & General.
All three supermarkets offer a choice of level term assurance or decreasing term assurance policies via their chosen partners. It is important that consumers understand the difference between these two types of cover, and also check that the supermarkets are offering as good value on life insurance as they do on food and drink.
This recommendation comes from the Essex office of nationwide independent financial advisers Independent Corporate Planning Ltd, who provide personalised impartial advice on life insurance, as well as instant online quotations via their website at www.icplanning.co.uk. Their independent status means they are able to source comparative life insurance quotations from a wide range of insurance companies rather than being tied to just one provider.
There are two main types of life insurance: term assurance and whole of life insurance. Term insurance is the cheaper of the two options, and is the only type of cover currently offered by the supermarkets. Term insurance runs only for a fixed length of time (the term), and will only pay out if you die during that fixed term. At the end of the term, cover ceases. Term assurance is usually timed to coincide with the end of a large financial commitment, such as the repayment of a mortgage.
Because term insurance is commonly used to protect a mortgage, there are two types of term cover available: level and decreasing. Level term cover is most suitable for people with interest-only mortgages where the level of debt that needs to be covered remains constant throughout the life of the mortgage. For people with repayment mortgages, the amount they owe the lender decreases over time, and therefore decreasing term insurance (where the level of cover reduces each year during the term of the insurance) is often a more cost-effective option.
Commenting on the importance of life insurance, Independent Corporate Planning director David Miles based in Brentwood, Essex, says: “Nobody likes to address the issue of death, especially when younger. But if you have a family, you must ensure that they are well protected in the event of something happening to you. Many people insure their car, their house, and their other possessions, but forget to cover the life of the person that pays for all these things in the first place. Current levels of State benefits mean that if you have two children and your spouse were to die you would receive a maximum of £122.80 per week in benefits – not very much if you have been used to living on two salaries. In a situation like this, life insurance can help you maintain your lifestyle at a time of great emotional loss.”
As to whether the supermarkets offer the cheapest cover, a lot will depend on your individual circumstances. What may be the cheapest life insurance company for one person may not be for another. Therefore, the fact that each supermarket only offers policies from one insurer could mean you end up paying more than you would if you went to an independent financial adviser (IFA) who can choose from many different insurance providers.
For example, a joint life policy for a male non-smoker aged 30 next birthday and a female smoker aged 34 next birthday requiring £150,000 level cover over a 35 year term would cost £48.55 per month with a Legal & General policy from Sainsbury’s, or £47.75 per month with a Norwich Union policy from Tesco. By going to an IFA, the same cover could be obtained via Bright Grey (a division of Royal London) for only £39.35 per month. Over the life of the policy this represents a saving of £3864 by taking the IFA option rather than the Sainsbury’s one.
As well as being able to search the entire marketplace for the best premiums, an IFA can also arrange add-ons to the cover which may make it more suitable for you. For example, you might want to include critical illness cover so that you receive a payout if you survive a critical illness such as a heart attack or cancer. Or you may wish to include waiver of premium cover, which means your life insurance premiums are paid in the event that you are unable to work due to illness. Neither Asda nor Tesco offers this option.
Commenting on what the supermarkets can offer, David Miles of Independent Corporate Planning said: “I would urge anyone considering taking out life cover to take specialist advice from an independent adviser, such as ourselves, who can search the entire marketplace to find the most appropriate level of cover at the best possible price. Even someone who already has life assurance in place could benefit from reviewing the cover they have, because rates have dropped significantly in recent years, and we may now be able to offer a similar level of cover for a lower premium.”
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